A Surprise Benefit For Student Loan Borrowers From The CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed Congress last week to address many of the issues created by the coronavirus. President Trump quickly signed the bill into law on Friday night. Included in the $2 trillion package is six months of relief for most student borrowers. Their loan payments are suspended—interest-free—through September 30, 2020. And for borrowers seeking forgiveness under the Public Service Loan Forgiveness (PSLF) program or income-drive repayment (IDR), those non-payments would count as though they had been made before the crisis.
New guidance from the Department of Education showed a new benefit to student borrowers. While the legislation was signed into law on March 27th, the Department of Education is making the administrative forbearance retroactive to March 13th. In the questions and answers for student borrowers, the Department told borrowers who may have made a payment on or after March 13th that they can request a refund for their student loan payment. Borrowers must contact their student loan servicer to receive this refund.
Borrowers were already eligible to get an optional forbearance under President Trump’s previous directive, but it was not automatic. Additionally, unlike under the CARES Act, those non-payments would not count for a borrower seeking student loan forgiveness. For that reason, many borrowers might not have opted to go into forbearance and would have continued to make payments. Now, according to the Department’s questions and answers, all of this will count towards forgiveness.
So while most thought of this as a six-month student loan relief package, it actually provides seven months of relief for many borrowers. Those student loan borrowers who are seeking forgiveness under PSLF or IDR may ask for refunds on payments made on or after March 13th, 2020.
Here’s what else you need to know:
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If you have private loans, you are not eligible.
If have a Federal Family Education Loan (FFEL) Program or Federal Perkins loan not owned by the Department of Education, you are not eligible. However, you can consolidate if you want, but you should consider what that means as outstanding interest will capitalize and your interest rate could be higher later.
According to the Department of Education, if you have an auto-debit set up to make your payments, those payments will be suspended through September 30th, 2020. You do not need to do anything to stop them, saving you time from stopping them and setting them up again in October when payments are due.
You have the option to continue payments during this time if you are financially able. Borrowers can make their regular payment amount or even a smaller amount. With 0% interest, borrowers can make progress paying down their loan faster. If you would like to keep your auto-debit, contact your loan servicer to opt-out of the forbearance.